Conversations With a Bear

"Stocks Likely To Crater From Here," read the subject line of an email that landed in my inbox last week.

"Sequestration cuts, weakening GDP growth, higher taxes and high gasoline prices are all but a few reasons why author and economic researcher Chris Martenson PH.D foresees the stock market likely to plummet within the coming months," it warned.

I usually ignore such hyper-specific emails, but I gave this one a look for one reason: I feel better about the economy now than I have in a while, and in an attempt to avoid confirmation bias, it's always best to bounce your thoughts off someone who disagrees with you.

So Chris and I exchanged a back-and-forth chat about the economy and investments. Here's the transcript, condensed for clarity.

Morgan Housel: You cite an increase in taxes and gas prices as a reason you expect stocks to plummet. But the last time we raised taxes in the early 1990s, stocks surged. Same with tax hikes in the 1950s. And gas prices are up 40% over the last three years, yet stocks are up by more than a third during that time. I'm not saying it's causation; just that the relationship is much more complicated than we often think. I just don't see the evidence that higher taxes or higher gas prices automatically lead to poor stock returns. (And for what it's worth, gas prices have been falling for a month now).

Chris Martenson: My thinking here is that stocks do respond poorly to are falling earnings and recessions are a powerful driver for falling earnings. Rising energy prices are well correlated with recessions and so I see high gasoline prices as a headwind to economic growth. The US economy is barely above stall speed when measured in terms of real GDP, and is a tick below the 3.7% nominal growth threshold that has been breached in every recession stretching back to 1980 (and at no other times, I should note). It is in the context of a weak economy that I wish to observe that the recent tax hikes and spending cuts of the US government provide yet more recessionary weight to the current environment.

Morgan: So the call, then, is for a looming outright recession? I agree that recession would be bad for stocks, of course. And while you can never rule out the possibility of a recession -- we're very bad at predicting them -- the negatives of higher energy prices and tax hikes can be countered by a number of things going right in the economy. Housing starts are rising at an annual rate of more than 25%, and will likely keep rising given low inventory and demographic trends. Household debt payments as a share of income are at a three-decade low, and there's evidence that consumer deleveraging is now complete. Energy production is booming. The near-stagnant GDP growth in the fourth quarter was almost entirely due to a big pullback in defense spending, which itself was the echo of a big rise in defense spending in the third quarter. And while gas prices have risen since last fall, prices are lower today than they were a year ago, and considerably lower than they were in mid-2011 -- to say nothing of real prices after nominal wage growth.

I would never rule out a recession, but the odds of one occurring in the coming year seem rather low to me, perhaps one in five. What odds do you place on a recession occurring?

Chris: I consider one to be far more likely than not, well over 50% in the US ... and the combined impacts of the sequester and Obamacare which I peg at between -1.5% and -2.5% for 2013. The sequester is easy to peg, that's going to be 0.6% full year, but at an annualized rate of -1% between here and Oct 1, 2013. ...

You cite many positive aspects, including booming energy production, and I'm pretty much in agreement with all of them with two caveats. First oil production is up, but this isn't your grandpa's oil, it is expensive oil. With the all-in cost of production for new oil in range of $70-$90 per barrel, we'll see a nice reduction in our import requirements, but not in the hits to disposable income. By my records at $3.50 gal avg., gasoline is twice as expensive as it was a decade ago, and that is an important factor to consider.

Second, household debt payments are as low as they are principally because of low interest rates, and less so because less debt is being carried, an essential part of the definition of (and psychological benefit of) deleveraging. To put numbers to this, the Debt Service Ratio (DSR) has fallen from a bit over 14% at the end of 2007 to 10.4% today for a decline of ~35%. However, household debt has declined from $13.763 trillion (Q108) to $12.844 trillion or by just a bit over 7%. ... I feel it is essential context.

All told, I am increasingly convinced that the risks of recession are higher than not and that prudence will serve investors better than greed.

Morgan: So let's say we're heading for a recession this year. What's should an investor do with his or her money?

Chris: I am especially leery of high yield bonds which have just hit all time, as in never-before-seen, highs. The class of companies that comprise the high yield bond universe do quite poorly in times of stress, for obvious reasons.

My general advice goes like this:

Get out of high interest debt that is higher than your likely investment returns. Paying down credit card debt, auto loans and the like is one of the better investment moves you can make. Plus it feels good.

With your next tranche of funds, invest in your house, if you own one. Investments in things like insulation ,energy efficiency, solar hot water and/or geothermal typically have double digit returns, sometimes even triple digit, where your only risk is that energy prices fall dramatically. It's time to broaden the definition of 'investment' to include prudent investments to day that reduce your future cash flows tomorrow.

Put a minimum of 10% of your portfolio in gold. I have been giving this advice since 2003 and continue to give it because gold is the only monetary instrument I know of that is not simultaneously someday else's liability. Given all the QE and other overt forms of debasement ongoing in the world, coupled to negative real interest rates, and high deficit spending by governments gold has a natural tailwind for price appreciation. However, I am most enamored with gold's hidden option potential. Seeing that various cross-border currency stresses and imbalances are only increasing, there is a non-zero chance that gold is one day remonetized. While that is a small chance, it remains a possibility and this gives gold an embedded call option. Should that option value ever be realized the gains should be rather exemplary.

Got money left over? Then have your wealth managed carefully and safely with an eye on return of principal rather than a return on principal. This is no time for buy and hold, but to carefully weigh the risks and rewards. With the Dow and bonds at all time highs financial assets are as pricy as they've ever been and require a very generous future to distribute more gains to all their holders.

Morgan: I agree with a few, and disagree with others.

High-yield bonds -- yes, they're lurking with danger. Housing -- agreed, when valued against average rents or average incomes, they're by and large a great deal.

Gold, I'm skeptical. With prices surging over the last decade, the gold market appears to be well aware of the policies you describe. As an investor, my worry would not be that high inflation will soon take off, but that gold is already priced for such an event. What's more, gold has a low correlation with inflation over time. It correlates fairly well with A) negative real interest rates, and B) Market panic, either of which are entirely possible going forward, but less likely in a strengthening economy (which you and I seem to respectfully disagree on). And deficit spending is declining rapidly, with deficits as a share of GDP falling by a third over the last three years. I wouldn't count gold out, but I feel the past decade's returns have created a dangerous perception that it is a particularly safe asset, which history is not kind to.

Furthermore, I think the last decade has shown that trying to time the market's ups and downs can be dangerous. Buy and hold, on the other hand, has performed remarkably well. No one consistently buying and holding a low-cost S&P 500 index fund over the last 13 years has lost money -- even in real terms, with dividends reinvested -- yet the number who have lost out by trying to jump in and out of the market is off the charts. The S&P 500 trades at 14.3 times expected 2013 earnings, which is nowhere near the priciest of all time. On a CAPE basis, the index now trades at 22.5 times earnings, versus 19.5 average since its inception in the 1950s. Robert Shiller, who pioneered the method, recently said he expects stocks to produce annual returns of 4% real, or 6%-7% nominal, going forward. Not a king's ransom, but very likely more than one will earn elsewhere.

Let's say I'm an investor who can stomach volatility and has a long-term outlook. Doesn't it make sense for me to sit tight?

Chris: Well, I guess that depends on your definition of 'long-term.' For myself here at the tender age of 50, I consider anything over ten years 'long term' and on that basis I am just not a fan of equities (in general) here for reasons that go well beyond the possibility of a near-term recession.

Warren Buffet once noted that corporate profits are unlikely to grow faster than 6% per year and that when people forget this they are likely to get into trouble. The reason for this is that it is impossible for corporate profits to grow faster than nominal GDP for very long, let alone forever. Today corporate profits are near 11% and the main reason for those excessive profits can be traced to government deficits and reduced personal savings. As you note, government deficits are on the way down and, if that is a structural condition of the next ten years (hopefully!) then we have a serious headwind to corporate profits that will tend to bring them into alignment with historical norms. As a believer in reversion to the mean, I have a pretty strong affinity for the idea that corporate profits are due to moderate.

But more importantly, I have serious doubts about nominal GDP growth even managing to achieve the 6%+ necessary to even support normalized corporate earnings over the next ten years. The reasons are related to structurally and permanently elevated oil prices (new finds are required to keep production up and they average $70-$90/barrel, so this is the new floor) and the still entirely too high debt levels that, although moderated from the recent peak, remain over 350% of GDP. To me this provides sufficient cause for concern that equities might badly underperform both their recent and historical performance over the next ten years. On the basis of cyclically adjusted earnings stocks are anything but cheap here. ...

If one does have a stomach for volatility and a long term outlook I do think there are companies and sectors that make sense, so I am not saying one must be entirely out of stocks, but the broad indexes are very much out of my favor at this time and will remain so until fairly valued and earnings are back in a middle historical range. I'd hate to pit myself against Robert Shiller and his call for 4% real gains in equities, but until and unless nominal GDP roughly doubles from here, I think a strong case could be made for returns near zero over the next 5 -- 10 years.

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Chris Martenson: "... I see high gasoline prices as a headwind to economic growth."

Okay so here are my annual costs for 93 octane;

2011 = $3.99

2012 = $4.08

2013 is about the same as 2012.

Chris Mortenson: "Put a minimum of 10% of your portfolio in gold." "...gold has a natural tailwind for price appreciation"

Why gold? Why not essential commodities? I've focused a bit on commodities, and in particular XOM, CVX and NOV as well as a bit of GLD. I also own HACMX and REITs. So why focus on gold??

Perhaps Mr. Martenson is a perma bear?

"This is no time for buy and hold, but to carefully weigh the risks and rewards." Duh, that's what I do each and every time I evaluate my portfolio! Here's my perspective. Invest for the long term and consider short term issues. However, I use the "short term" issue to dictate how I invest new money. The long term, via my investment accounts, I seldom touch. Early 2008 was the only recent exception.

Chris Martenson : "Well, I guess that depends on your definition of 'long-term.' For myself here at the tender age of 50, I consider anything over ten years 'long term' and on that basis I am just not a fan of equities..' At the tender age of 67, I'm not a fan of knee jerk reactions. Nor is my crystal ball able to predict outcomes next week or next decade.

I'd like to know how Mr. Martenson's most recent 10 year portfolio has done, using his investment perspective. If he went 100% into gold, I'd say he's a gambler.

Why in the world would someone do something as asinine as that? Not only is that going long FEAR a complete waste of money, not only is the price trend of Gold clearly heading down in a world where asset prices are clearly inflating, but over 83% of the time during its price history, Gold has been a net loser.

Just ask my neighbor who leveraged his freaking house at a Gold market price of 1626 a few years ago. He was practically salivating at the mouth to buy more Gold ( which pays no dividend) back then.

In fact, after taking a cool 16k of equity OUT of his home, he went straight from Chase bank to his broker that very day, bought more Gold, and then decided to sit up, of all places, in a freaking bar, show everyone a backward looking chart, and talk about how good of an investment he just made.

Of course, everyone in the immediate vicinity agreed with him, too.

I knew right then and there that the bull run in Gold was soooooo OVER!

"This is no time for buy and hold, but to carefully weigh the risks and rewards. With the Dow and bonds at all time highs financial assets are as pricy as they've ever been and require a very generous future to distribute more gains to all their holders."

---------------

1. In the year 2000 General Electric stock was trading for more than 40 times earnings against a 6% ten year u.s. treasury bond. TO-DAY, that very same stock is 60% cheaper in market price, trading for less than 13 times 2013 earnings against a u.s treasury bond that yields less than 2%.

2000 vs 2013 S&p 500 valuations are equally similar. Even at a market price of 1587!

Thus, to suggest to those of us with an ability to actually think for ourselves that equity values are at an "all time high" makes absolutely so financial sense whatsoever.

2. I won't even get into Gold, for I have already demonstrated the long term effects when people start mixing GREED with leverage.

3. Buy and hold was, is, and always will be, Eternal. it was when I was buying McDonalds at 13 in 2002, it was when I was buying Harley Davidson at 10 in 2009, and it was when i was buying Pfizer at 16 in 2010. I still hold onto to all of these stocks today and will continue to do so until they pry them out of my cold, dead, hands.

Thus truth be told, what people like Chris are basically advocating is Pessimism, or better yet, rearview mirror investing.

For no sound investor in his right mind, using both logic and arithmetic would ever invest 10% of his portfolio, or even 1% of his portfolio, in a "thing" paying no dividend when he could just as easily own 500 of the best businesses on the planet This is especially irrefutable when their earnings rates are 7-8% to ones cost basis in a 0% interest rate economy.

...then it looks less like a crazy bubble and more like a rational response to a global print-fest. And if you think that going forward, a) the printing will continue/accelerate, and b) it will be less effective in increasing corporate profits, it behooves you to have some gold. I think 10% is a reasonable number to count as insurance against this event.

Because remember, the Fed has played all its rational cards now, and recessions happen on average of once every five years. You can't drop the interest rate to counter the next one.

I started buying stock in the 1990s. I bought 2 and didn't know what I was doing. I sold both at a loss. Then I decided to follow the Dow Dogs. I bought and held several stocks for about 5 years and then sold them. I did well in that I made a small profit. Then I decided that I really wanted to study the market and become a trader. I have taken all kinds of courses from all different kinds of companies. I am not a trader. After all the courses which included options trading for options sake I found being in and out of the market is just not smart and hard on the bottom line, not to mention principal. So, I have finally decided that buy and hold through thick and thin is the best way to gain wealth. No, it isn't fast and it isn't flashy. Yes, it requires discipline because you can't just keep taking out your money. Compounding is the key. And compounding means hanging in for the long term. I tune out all the splashy comments and just plod along. But one day, my nest egg will be quite handsome I am sure. Fool on!!!

Hey folks, I'm just the average guy who is cash strapped, out of work and trying to make my wife's pension and mine produce as much as possible since we're both 60 year old.

I pulled everything out of my wife's our pensions, which guaranteed 550.00 per month for life. A joke in my book, but after reading this and a few other articles I'm scared to death.

Of course I put her in Aggressive Growth, Large Cap Value, Mid-Cap and Small Cap Growth funds, along with some Motley Fool stock picks. I need to produce as much return as possible with little time. Yes, I took the risk. God know, now I'm regretting it.

Now I feel I should liquidate everything and try to find a annuity to protect every last penny she has.

Luckily, my former employer (my pension) messed up the move of over $100,000 to a Rollover IRA. I'm stuck with staying with them for another 3/4 months, BUT they are guaranteeing 4.5% return APR.

When I thought about that, I'll take the 4% guarantee rather than risk my life savings on this market, which neither the bulls or bears have a FREAKIN clue.

Why don't all you nice people reading this give me your opinions. Stay or go.

Right now with the shape of the country/world and the unknowns of why our market is kicking butt (besides Bernake pumping fed money into it), I have no confidence left.

I liked this respectful dialogue between two people who see things differently. A really useful exercise. Comments/Questions:

1. One thing that never seems to be mentioned is that almost every machine is getting more efficient. Sure, gas prices are up, but so is efficiency, meaning that gas and energy costs in general are a smaller % of manufacturing and transportation costs. Therefore the impact of price changes is less.

2. It's really quite impossible to factor in tomorrow's innovations, so everyone assumes that what exists today will exist tomorrow. I have no idea how to do that myself, but the impact is greater than zero.

3. Printing money at the rate that we are does seem problematic at some point. Are we really in uncharted territory, or is there a historical precedent, both for the US and globally? I'd love additional discussion from someone who can explain this. I know a banker who commented this week that a large percentage of their deposits pay no interest and these funds are used by the Fed. When interest rates go up even a little and that money goes somewhere else, the Fed won't have that money to use. His feeling was this will quickly make rates go even higher, or at least a good probabililty. Anyone care to comment?

4. How much of corporate profits are created by low interest rates? Who are the winners when rates go up?

I think you shouldn't be managing your own investments. Are you seriously asking complete strangers for advice? TMF has articles on their site regarding how to find a qualified financial adviser. Read them.

I think the gold bugs are way over rated . Look at what happened to gold today. I am nearly 89 years old and have lived through a depression and many wars, including WW2 in which I spent three years of active and some combat duty. Things are moving slowly but they are moving ahead in contrast to Europe and Japan. I still am an optimist and while Obamacare and sequester may have some negatives I feel having more people get medical insurance is a positive.

I greatly enjoy the articles that Morgan Housel authors. They are insightful, informative and as best I can tell, factual. From my limited research when Morgan makes a statement with figures, his information is on the money.

I am not a sophisticated investor and am very conservative. Two books I have read have been my guidelines and if any investor is interested you might want to read them also:

A Random Walk Down Wall Street - Burton Malkiel

The Intelligent Investor - Benjamin Graham

I think those of us who are amateur investors (and maybe some who call themselves professionals) should read these 2 books. Wise men, both.

I think much of what Chris Martenson has been writing has already been discredited his constant Malthusian hype biased towards the idea of scarcity. His book "crash-course" while making some interesting points is a one dimensional idea that he can't find a way to escape from. He sees everything throught the same lense. He is a pundit, not a money manager.

Beyond that he is guilty playing loose with the facts particularly when it is convenient to support his overall thesis. So the gasoline comment early in the interview as some of the readers quickly picked up was an intellectual dishonesty ahead road sign.

CM cites high gasoline prices as a reason for a recession to occur. While certainly gasoline prices have risen sharply over the last 10 years, the use of gasoline and diesel has grown much more efficient over the same time period.

And, gasoline is only on part of energy consumption. How about lower natural gas bills for home heating. Did that have any effect on disposible income the last few years? CM would rather ignore that. Much of the driving we do is optional. Is the need to heat one's home elastic or inelastic? Well there is always blankets.

What also seems to escape CM are huge secular energy trends that don't conveniently agree with his peak everything thesis.

My closing note to Morgan, if you want to check against confirmation bias, find a bear that is more credible. Or, just wait until you can't find one of any kind. Then you know it's time to lighten up.

Morgan: "The S&P 500 trades at 14.3 times expected 2013 earnings, which is nowhere near the priciest of all time."

But what would lead you to believe that earnings will indefinitely remain 60% elevated? Earnings have always been mean-reverting historically, and they are WAY above their mean currently. If and when they revert like they always have, the market is wildly overvalued.

Morgan: "On a CAPE basis, the index now trades at 22.5 times earnings, versus 19.5 average since its inception in the 1950s."

OK so you're first admitting that stocks are 15% overpriced by this particular timeframe of this statistic. But I would also ask why you're starting with the 1950s, when CAPE can be measured back much farther than that? Benjamin Graham also used this measure back in the 1930s, so why not start there? The 1950s start date seems arbitrary and would overweight the historically higher PEs seen since the mid-90s. Taken since the market's inception instead, CAPE is 42% higher today than its historical mean. Just some food for thought...good article!

<<But what would lead you to believe that earnings will indefinitely remain 60% elevated?>>

What will likely cause margins to fall? When companies expand employment and raise wages (as the opposite is what has pushed margins up). Higher wages and more employment leads to economic growth, and more revenue for corporations. This is why there's little correlation between margins and returns over time. The last time margins fell was the 1990s. I don't need to remind you that wasn't a bad time for stocks. Or even earnings.

<<But I would also ask why you're starting with the 1950s, when CAPE can be measured back much farther than that?>>

The S&P began in 1957. Robert Shiller of Yale recreated the index before that, but it's not quite an apples-to-apples comparison. The vast majority of listed companies in the early 20th century were highly cyclical companies like railroads, banks, and metals companies. Comparing that to a group of companies dominated by consumer and technology can be misleading. That's why I start in the 1950s.

<<The 1950s start date seems arbitrary and would overweight the historically higher PEs seen since the mid-90s>>

A 63-year period is fairly robust. Yes, it includes the high PE 1990s. But it also includes the incredibly low PE ratios of the early 1980s.

Te cuidado, Money. TMF writes in their guidance that if person absolutely needs the money to live on in next five years, very conservative choices are safer. Protect your principal, try to grow at inflation rate, and get professional guidance. Be aggressive only if you can afford to lose. Then go for moderately aggressive, never the extreme, and stay diversified. Bogle and Vanguard Funds write for people in your situation. What's wrong with guaranteed 4.5%? (I am only an ordinary non-pro person.)

Excellent article, and I appreciate that MF writers take their own advice about things like confirmation bias and publish opinions that do not agree with their own. Due to guidance from MF, I have started making myself read an article that is bearish about a stock that I'm considering so that I'm not seeing it through rose colored glasses and have to defend my reasons for buying.

Also, regardless of whether the market goes up or down, I evaluate my portfolio regularly and make sure that every stock in it fits my investment thesis. If the market goes up, I'm rewarded with greater returns, and if it goes down, I know which ones I will invest further money in at a discounted price.

Recessions are caused by excesses in the economy, either a bubble that self-corrects, such as the 2008-09, or imbalances like excess inventory and capital spending that are usually accompanied by rising inflation and get corrected when the Fed tightens and takes away the punch bowl. During recessions, consumption rarely goes negative (2008-09 was an exception) - consumption tends to decline toward zero growth and it is the decline in inventories and the decline in capital spending that causes the decline in GDP.

We have none of those excesses today. On the contrary, there is massive liquidity in the economy that has nowhere to go to earn an adequate return except into either the real economy or into equities. That’s why we’ve had a rising stock market and a stronger than expected economy so far this year and why that trend will continue. Follow the money.

So far, the chief problem with the economic recovery has not been lack of demand, but the suppression of what Keynes called “animal spirits” - the desire of entrepreneurs and job creators to take risks – which has been hurt by the relentless anti-business rhetoric, policies, and actions of the current Administration and its supporters during the past 4 years. Historically, virtually all net job creation has come from investments made by entrepreneurs, in large companies and small.

What the Administration does not understand is that entrepreneurs care little about demand. What they care about is the potential reward in relation to the risk.

For the past 4 years, entrepreneurs and other job creators have seen too much risk and not enough reward for all but the lowest risk projects (those that simply maintain, instead of expand, existing capabilities), which has been to a great extent the result of uncertainties about tax rates, healthcare costs, the sluggish pace of the economic recovery, slower emerging country growth, the EU recession, and the possibility that the relentless populism of the Obama Administration could cause minimal growth or a recession in the U.S. in 2013-14.

Not all those factors are the result of the Administration’s anti-business rhetoric, policies, and actions, but most are. All the Administration needed to do to “create jobs” was to cease its anti-business thrust and start treating business as a partner instead of the enemy. That goes for the Administration’s unceasing attacks on “millionaires and billionaires,” as well, and its mindless pursuit of “fairness” at the expense of jobs for the poor and middle class and economic growth. As Margaret Thatcher said in her final Prime Minister Question Time in November 1990: “He would rather the poor were poorer, provided the rich were less rich.”

Because of such worries, it has been risk off in corporate boardrooms, with lots of the riskier capital spending and associated hiring deferred to more propitious times.

That appears to be changing, however. Since the December 31 fiscal cliff agreement and the January 18 proposal by House Republicans to extend the debt ceiling deadline to May 19, businessmen seem as a group to have decided to stop worrying and move forward. Corporate chieftains at Davos and in CNBC’s studios since have been increasingly saying that enough is enough, that Washington infighting has become increasingly irrelevant, and that it’s time to get on with life, before the other guy beats us to it.

Fed policy has had little to do with this change in the desire to take risks. It has been chiefly the grudging progress made in Washington toward an agreement that will lessen uncertainty and a seeming reduction in the glaring conflict that has stymied progress toward a permanent solution to the fiscal problem. Job creators won’t wait for an ultimate solution before they take action. Convincing progress is all they need. Otherwise, they risk losing out to the other guy.

As I said, entrepreneurs and other job creators are sick of waiting for Washington to get its act together. They’ve been putting needed replacement and expansion capital spending and hiring on the shelf for 4 years now and the unused cash and borrowing power keeps piling up and returning next to nothing. Now that some of the uncertainties are moving toward resolution, they are ready to pick up the pace, and the resulting increase in hiring and capital spending will mean a stronger than expected economy in 2013, without any “help” from Washington.

That’s going to cause an increase in long-term interest rates, which will cause money to flow from bonds to stocks as bonds start falling, a further bullish effect.

This will happen BEFORE there is an increase in “demand.” Entrepreneurs don’t worry about demand. They are the most optimistic persons on the planet. To a person, they believe that if they build it, demand will come.

The demand needed to justify the new hiring will come from where it ALWAYS comes from, from the newly created salaries and wages of the new hires, and not from lower saving or increased borrowing of those already employed (which incremental demand is unsustainable), or from government transfer payments from one consumer to another (which is a wash). It’s a bootstrap operation.

That’s the process that has driven economic growth for thousands of years, even though there are some Nobel-prize winners in economics who still don’t get it (academic economists tend to work from theoretical models and often don’t understand how the real world actually works).

An example is restaurants: Entrepreneurs open thousands every year, each requiring a substantial investment in space, equipment, and workers, all before there is even a single dinner reservation. There is no line of people outside waiting to be fed.

Jobs first, then demand. That’s what will make the current strength in the equities market and the economy continue this year.